"Seems like Money Morning is saber rattling. Not a word about the heat & drought in the Midwest and Great Plains? Seems some discussion about our rapidly changing climate might be a better discussion."

First, let me say that Peter's note was well received. But I'd be remiss if I didn't take the time to delve into what Peter viewed as "saber rattling" because I just don't see it that way. As always, my goal is to simply connect the dots.

The thing is, the South China Sea is just one of them.

Here's my response…

Dear Peter,

Thanks for the taking the time to comment. We've found that folks like you who take the time to post a comment — and who actually contribute some thoughts of their own to the posting – tend to be very well informed folks.

And believe me when I tell you that we like and respect that a lot.

I zeroed in on your comment in particular because I agree with part of it – the part about the importance of the drought. I've written a number of columns about that issue in Private Briefing over the last month or so, including one in back in June that that warned readers that the crop numbers were going to be a lot worse than the government was saying.

In recent weeks, that's just what's happened. (Fortunately, we also showed readers how to protect themselves).

So, again, you and I are on the same page when it comes to the drought.

Now, as far as this business about our South China Sea coverage being "saber rattling," I have to say that I very much disagree.

Part of the problem is that this escalating disagreement isn't getting much coverage in the mainstream U.S. media (and I spent more than 20 years as a mainstream media journalist, and spent time abroad, so I understand this very well).

What's happening in the South China Sea is a tinderbox just waiting for the right spark. And believe me when I tell you that this scares the hell out of our government. We could very well end up being caught in the middle.

On one hand, we want to maintain our allegiances with Taiwan and the Philippines, and build an economic bridge to Vietnam (our leaders in Washington realize that a bigger economic presence in Asia is one of the only things we can do to jump-start the U.S. economy in the long run). At the same time, we don't want to square off against China, and lose out on that trade potential and create another military headache.

This is a huge issue in Asia, where it's causing considerable angst.

A hefty portion of a recent Radio Voice of Vietnam broadcast to North America that I monitored was devoted to the South China Sea standoff. And that's telling.

As you and I both know, those broadcasts are, in part, carefully crafted propaganda. So Vietnam wants us to know how upset it is over China's alleged incursion into its territorial waters.

And the fact that an Asian country would admit, well, weakness in such a public forum tells us that it is much more interested in having us understand how problematic this is than they are in projecting the image of a strong, in-control emerging economic power.

Two final points – one dealing with the U.S. economy, and the second dealing with a future filled with natural-resource shortages.

Regarding that first point, understand (as I mentioned earlier) that Washington sees this South China Sea mess as a major potential problem — at a time when we can't afford additional major potential problems.

U.S. Sec. of State Hillary Clinton has been working on this issue for two years. Beijing wasn't happy when we first got involved via Sec. Clinton two years ago. And it was a major focal point of her recent visit to Southeast Asia.

You see, Clinton's bosses realize that close economic ties with Southeast Asia are one of the few long-term solutions to this country's economic malaise. So a standoff that forces us to choose sides is the absolutely the last thing Washington wants right now.

And the potential for this situation to turn military is very real.

Just last week, a new report by a think tank called the International Crisis Group warned that the risk of escalation was high. The think tank also urged the countries that all claim control of this area to find a way to collaboratively manage the fishing and energy resources and to create a forum to handle the "incidents" that will inevitably take place in such a disputed region.

Warned the report: "In the absence of such a mechanism, tensions in the South China Sea could all too easily be driven to irreversible levels."

That brings me to my second final point – shortages.

You need to look at the big picture here (just as you so shrewdly did with the drought issue). China's aggressiveness in the South China Sea region is fascinating. The country is being as sweet as honey in all of its public statements and its acts of diplomacy. But it's being aggressive as hell (including allegedly sabotaging Vietnam drilling rigs in this region) in its physical actions.

And this aggressiveness isn't confined to the South China Sea.

Throughout the world, China is buying up energy, food, water, mineral and any other natural-resource assets companies are willing to sell or lease into a long-term contracts.

In fact, Chinese companies recently agreed to spend $15 billion to buy a major Canada-based oil-sands player and $1 billion for a natural-base pipeline that serves more than 7 million customers in the United Kingdom.

China is snapping up or leasing natural-resource assets in Latin America, Africa and the Pacific region as well.

And with $3.4 trillion in foreign reserves, the country can shop "til it drops for a long time to come.

Beijing sees this aggressive buying as necessary for China's continued growth. But most of these resources are finite – either in terms of reserves (oil) or in terms of how much can be created in any single year (food).

So whether we're talking about the South China Sea, or the oil-sands purchase in Canada, there's only one conclusion to reach: All of these stories, taken together, demonstrate that future shortages of oil, gas, food, water and other natural resources are a mathematical certainty.

In other words, in the long run, these shortages cannot be avoided. And some of those shortages will start to appear sooner rather than later.

Investors and consumers who prepare for these eventualities will be able to navigate the whipsaw markets that are headed our way – and may actually fare quite well.

Investors who ignore this will do so to their own detriment – and to the detriment of their families.

Take another look at this, Peter, and you'll see what I'm saying. Take a look at our new documentary investigation on this and you'll begin to understand how all of these dots are connected. You can see it by clicking here.

Given the excellent thinking you demonstrated with regard to the drought (where, as I said, we're in complete agreement), I think you'll come to the same conclusion as us on this other topic, too.

Thanks again for taking the time to offer your comments and insights. I hope you write again very soon.

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

Thank you for all your excellent and incisive analysis and commentary. Perhaps my perspective aligns with that of many retired folks across our country. In my 70's, I simply have neither the major financial resources nor the long-term ability to make the financial investment moves your conclusions call for. I have traveled widely and lived overseas for many years. I have several graduate degrees from major universities. I have enjoyed three consecutive careers in several fields. I appreciate what you are saying. I am well able to evaluate your analysis, as far as it goes. However, I don't have the long-term or even medium-term means to respond as you recommend to folks with major financial resources. I have paid off all our debts. I own my house, lock, stock and barrel. I have mutual fund, annuity, and similar savings. What do you have to say and to help us — and I would hazard to guess that we are a great part of your mailing list.

Thank you for taking the time to comment. Your observations are good ones … especially the part about folks who are trying to make sense of these very tough and very complicated financial markets — and do so while attempting to augment (even maximize) their limited but carefully earned savings.

That's precisely why we've embraced a "profit-while-you-learn" focus for Private Briefing, our $5 a month advisory service. We'll continue to provide the same strong profit opportunities … but with more focus than ever on explaining what we're doing and why.

Excellent observations and analysis, sir. Thank you for taking the time to share them with us.

I read Money Morning every day. However your comments about China and the territorial issues present in the South China Sea, and the issues attached to it, are right on and extremely succinctly described. I spent a lot of time in Asia and have been following the territorial dispute between China, The Philippines, Taiwan (which someday will be part of China), and Viet Nam for many years now. As China gets stronger it is getting more aggressive, and in time, especially as America weakens, it will attempt to resolve the issue with force and that would be a disaster for all of us. Especially if they win.

Its a little like fighting Iran in that the Iranians can do a significant amount of damage to our arraigned military force in the straights area, more than we want to admit. And when that happens, China will see its opportunity to enforce their will in the South China Sea, and we will not be able to stop them, or if we try, may get beat there as well.

The future is as you describe it. We as individuals need to get ready for some tough times.

Thanks very much for your positive response to our story, and for taking the time to share your own experiences. I, too, spent time in Asia — as a journalist, and clearly nowhere near as much time as you did.

The fact that a business veteran — who is also a veteran of that region — feels that we correctly captured the essence of what's transpiring in the South China Sea is heartening on a personal level. But the most important thing is that readers now know that we've given them the correct insight on the events that are unfolding in that key economic regions — meaning they can take the appropriate steps to best position themselves.

When we share our experiences and insights as you did, sir, it makes Money Morning a much more useful and powerful tool for our readership. Thanks for your superb analysis.

I'm not a paying subscriber and probably don't have the right to comment.
I appreciate that someone took so much time to reply to a comment. Thanks Money mourning. William Patalon
A company has recently been bought by china, by the name of Procon. Procon works specialized heavy equipment in the diamond mines. I have a fellow machinist aquaintance that shared his pay checks are all signatured in chinese now.
I haven't done my homework, but for the chinese to buy this company I would guess it is a substantial sized company.
Just felt like sharing.
Concerned
Dale Grieco.

Customers of Money Morning don't have to pay, and after reading your comments, I just want to tell you that we're fortunate to have you as a customer.

The story you shared is a powerful one, and underscores the point that we made in our piece about the South China Sea flap: This is a powerful developing trend that every U.S. investor must watch … and position themselves for.

One final point: If all Americans were as observant as you are, this country wouldn't be in the fix it's in right now. And those kudos extend to the other readers who have taken the time to comment on this piece.

Thank you for taking the time to post your comment.

Respectfully;

William Patalon III
Executive Editor
Money Morning & Private Briefing

P.S. I wanted to say that I was interested in your "fellow machinist" comment. My late grandfather (my Dad's dad) was a machinist on the Lehigh Valley Railroad. He was "old school," and very gifted. Growing up, I was always amazed by some of the things that I saw him do or make.

And his stories were always edge-of-the-chair enthralling.

My Dad is an engineer by education. But having grown up with my grandfather as his mentor and guide, my Dad to this day has an incredible range of abilities, and is probably the smartest and most-capable all-around person I've ever known.

My best friend, Harry, is also a machinist. And he's equally at home wiht the "old school" manual machines and the newer CNC equipment. I often boast to friends that can make a simple block of metal come to life. Indeed, some of the parts he made for cars that we had when growing up were so intricate that I kept them when those vehicles "went down the road." The workmanship was just too terrific for the parts to be discarded.

I think that our economy would be much stronger if there were more jobs for like that …

My apologies for the digression, but I was very grateful you took the time to write, and to share your experiences and insights.

Dear Mr. Patalon,
I wish to express my appreciaton for how tactfully You answered the comment of Mr. Peter M. about the South China Sea controversy.
I would like to see the same on the Italian press…

I have to say that I share Your point of view about the future treats facing all the Sout Eastern countries. If we look at it in an historical perspective we are now assisting to the cyclical rebirth of an ancient Empire, and the situation remind me very much what happened 22 centuries ago when Rome destroied her deadly enemy, Cartago, and supported by the fleet started to dominate the so colled "Mare Nostrum" for Centuries.

The Imperial policy of China, supported by the Confucianism philosophy which is deeply rooted in any governament official, is now producing the only actual example of real Strategic Policy for long term development and world leadership.

It is really disconforting to see that the only political leaders able to conceive a really capitalist policy are the exponents of the last Comunist country in the world.

As for myself, I remember when more than 20 years ago I was involved in engineering projects for China and I tought : I am supplying them with the rope one day they will use to hung us all.
What surprise me is that my easy prophecy has been realised so quikly.

Interesting reading by an Irishman living in South Africa amidst heavy snow today.
I request you to watch your use of large case letters when writing English. The correct English of your headline is: We are not sabre rattling. We are simply connecting the dots.
Kind regards,
McGillycuddy.

So much interests have been discussed about the issue of south china sea and I have noticed one thing:namely,none among the participants is a national of the supposed to be antagonists.so what they are doing?they are only inflaming the situation.

They all speak in Chinese. In fact as a business man who's worked there I've had businessmen (in petrol) ask me why we do business in English and not Chinese. (As if anyone should have to explain about this little island name Britain who colonized so much of the world…while they built a wall.)

I'm sorry to burst your bubble, but They are not going to be participating on an English Blog that has correctly identified that they are one of the few National Governments that have been strategically preparing for the resource wars for decades, and is ethnocentricly driven for dominance in the region, and has no problem recklessly destroying foreign own'ed businesses and property to further their indignation. Criticism has no part in Chinese culture. You are suborndinate to your Boss, or Subordinated, as demonstrated repeatedly by their current regime.

If you want their perspective, you will have to go to China, or a Mandarin Language Forum.

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